Who Rules America? by James Petras
www.dissidentvoice.org
January 13, 2007

In
the broadest and deepest sense, understanding how the US political
system functions, the decisions of war and peace are taken, who gets
what, how and why, requires that we address the question of 'Who rules
America?' In tackling the question of 'ruling' one needs to clarify a
great deal of misunderstandings, particularly the confusion between
those who make governmental decisions and the socio-economic
institutional parameters which define the interests to be
served. 'Ruling' is exacting: it defines the 'rules' to be followed by
the political and administrative decision-makers in formulating
budgetary expenditures, taxes, labor and social legislation, trade
policy, military and strategic questions of war and peace. The 'rules'
are established, modified and adjusted according to the specific
composition of the leading sectors of a ruling class (RC). Rules
change with shifts in power within the ruling class. Shifts in power
can reflect the internal dynamics of an economy or the changing
position of economic sectors in the world economy, particularly the
rise and decline of economic competitors.

The 'rules' imposed by one economic
sector of the RC at a time of favorable conditions in the world
economy, will be altered as new dominant economic sectors emerge and
unfavorable external conditions weaken the former dominant economic
sectors. As we shall describe below the relative and absolute decline
of the US manufacturing sector is directly related to the rise of a
multidimensional 'financial sector' and to the greater competitiveness
of other manufacturing countries. The result is an accelerating
process of liberalization of the economy favored by the ascending
financial sectors. Liberalization in pursuit of unregulated flows of
investments, buyouts, acquisitions and trade increases the financial
sector's profits, commissions, incomes and bonuses. Liberalization
facilitates the financial sector's acquisition of assets. The
declining competitiveness of the older ruling class manufacturing
sector dependent on statist protectionism and subsidies leads to
'rear-guard' policies, attempting to fashion an unwieldy policy of
liberalization abroad and protectionism at home.

The answer to the question of who
rules depends on specifying the historical moment and place on the
world economy. The answer is complicated by the fact that shifts among
'sectors' of the ruling class involves a prolonged 'transitional
period.' During this period declining and ascending sectors may
intermingle and the class members of declining sectors 'convert' to
the rising sector. Hence, while power between economic sectors may
change, the leading class groupings may not lose out or decline. They
merely shift their investments and adapt to the new and more lucrative
opportunities created by the ascending sector.

For example, while the US manufacturing
sector has declined relative to 'finance capital,' many of the major
investment institutions have shifted to the new financial 'growth
sectors.' Concomitantly, the converted sectors of the ruling class
will shift their policies toward greater liberalization and
deregulation, thus severely weakening the rear-guard demands of the
uncompetitive manufacturing sector. Equally important within the
declining economic sectors of the RC, drastic structural changes may
ensue, to regain profitable returns and retain influence and
power. Foremost of these changes is relocation of production overseas
to low wage, low tax, non-union locations, the introduction of IT
technology designed to reduce labor costs and increase productivity,
and diversification of economic activity to incorporate lucrative
financial 'services'.

For example General Electric has moved
from manufacturing toward financial services, relocated labor
intensive activity off-shore and computerized operations. Through
these moves the distinction between 'manufacturing' and financial
capital has been made obsolete in describing the 'ruling class'.

To the degree that older manufacturing
capitalists retain any economic and political weight in the RC, they
have done so via sub-contracting overseas to Asia and Mexico (General
Motors/Ford), invested in overseas plants to capture foreign markets,
or have been converted in large part into commercial and importing
operations (shoes, textiles, toys, electronics and computer chips).

Locally based manufacturers which remain
in the RC are largely found among military contractors living off the
largesse of state spending and depending on the political support of
congressional and trade union officials, eager to secure employment
for a shrinking manufacturing labor force.

During this transitional period of rapid
and all-encompassing changes in the ruling class, enormous financial
opportunities have opened up throughout the world. As a result of
political tensions within the 'governing class,' key policymakers are
drawn directly from the most representative institutions of Wall
Street. Key economic policies, especially those which are most
relevant to the RC, tend to be overwhelmingly in the hands of tried
and experienced top leaders from Wall Street.

Despite (or because of) the ascendancy
of various sectors of financial capital in the RC, and their
agreements on a host of 'liberalizing' economic policies, they are not
homogeneous in all of their political outlooks, party affiliations, or
their foreign policy outlook. Most of these political differences are
questions of small matter -- except on one issue where there is a
major and growing rift, namely in the Middle East. A sector of the RC
strongly aligned with the state of Israel supports a bellicose policy
toward the Jewish state's adversaries (Iran, Syria, Hezbollah and
Palestine) as opposed to another sector of the RC favoring a
diplomatic approach, directed toward securing closer ties with Arab
and Persian elites. Given the highly militarized turn in US foreign
policy (largely due to the ascendancy of neo-conservative ideologues,
the strong influence of the Zionist Lobby, and the instability and
failures of their policies in the Middle East and China) the RC has
pressed for and secured direct control over foreign economic policy.

The tensions and conflicts within the RC
-- especially between the Zioncons and the 'free marketeers' --
have been papered over by the enormous economic benefits accruing to
all sectors. All RC financial sectors have been enriched by White
House and Congressional policies. All have benefited from the
ascendancy of 'liberalizing regimes' throughout the world. They have
reaped the gains of the expansionary phase of the international
economy. While the entire ruling financial, real estate and trading
sectors have been the main beneficiaries, it has been the financial
groups, particularly the investment banks that have led the way and
provide the political leadership.

Ascendancy of Financial Capital

'Finance capital' has many faces and
cannot be understood without reference to specific sectors.
Investment banks, pension funds, hedge funds, savings and loan banks,
investment funds are only a few of the operative managers of a
multi-trillion dollar economy. Moreover each of these sectors have
specialized departments engaged in particular types of
speculative-financial activity including commodity and currency,
trading, consulting and managing acquisition and mergers. Despite a
few exposés, court cases, fines and an occasional jailing, the
financial sector writes its rules, controls its regulators and has
secured license to speculate on everything, everywhere and all the
time. They have created the framework or universe in which all other
economic activities (manufacturing, retail sales and real estate) take
place.

'Finance capital' is not an isolated
sector and cannot be counterposed to the 'productive economy' except
in the most marginal 'local activity'. In large part finance capital
interacts with and is the essential driving force in real estate
speculation, agro-business, commodity production and manufacturing
activity. To a large degree 'market prices' are as influenced by
speculative intervention as they are by 'supply and demand.' Equally
important, the entire architecture of the 'paper empire' (the entire
complex of inter-related financial investments) is ultimately
dependent on the production of goods and services. The structure of
power and wealth takes the form of an inverted triangle in which a
vast army of workers, peasants and salary employees produce value
which becomes the basis for near and remote, simple and exotic,
lucrative and speculative financial instruments. The transfer of value
from the productive activities of labor up through the ladder and
branches of financial instruments is carried out through various
vehicles: direct financial ownership of enterprises, credit, debt
leveraging, buyouts and mergers. The tendency of 'productive
capitalists' is to start-up an enterprise, innovate, exploit labor,
capture markets and then 'sell-out' or go 'public' (stock
offerings). The financial sector acts as combined intermediary,
manager, proxy-purchaser and consultant, capturing substantial fees
and expanding their economic empires and preparing the way to higher
levels of acquisitions and mergers. 'Finance capital' is the midwife
of the concentration and centralization of wealth and capital as well
as the direct owner of the means of production and distribution. From
exacting a larger and larger 'tribute' or 'rent' (commission or fee)
on each large-scale capital transaction, 'finance capital' has moved
toward penetrating and controlling an enormous array of economic
activities, transferring capital across national and sectoral
boundaries, extracting profits and dumping shares according to the
business, product and profit cycle.

Within the ruling class, the financial
elite is the most parasitical component and exceeds the corporate
bosses (CEOs) and most entrepreneurs in wealth and annual payments. It
falls short of the annual income and assets of the super-rich
entrepreneurs like William Gates and Michael Dell.

The financial ruling class is internally
stratified into three sub-groups: at the top are big private equity
bankers and hedge-fund managers, followed by the Wall Street chief
executives, who in turn are above the next rung of senior associate or
vice-presidents of a big private equity funds who is followed by their
counterparts at Wall Street's public equity funds. Top hedge fund
managers and executive have made $1 billion dollars or more a year --
several times what the CEO's make at publicly traded investment
houses. For example in 2006 Lloyd Blankfein, CEO of Goldman Sachs,
was paid $53.4 million, while Dan Ochs, executive of the hedge fund
Och-Ziff Capital paid himself $220 million dollars. That same year
the Morgan Stanley CEO received $40 million dollars, while the chief
executive of the hedge fund Citadel was paid over $300 million
dollars.

While the 'hedge fund' speculators
receive the highest annual salaries, the private equity executives can
equal their hundreds of millions payments through deal fees and
special dividend payments from portfolio companies. This was
especially true in 2006 when buyouts reached a record $710 billion
dollars. The big bucks for the private equity bosses comes from the
accumulating stake executives have in portfolio companies. They
typically skim 20% of profits, which are realized when a group sells
or lists a portfolio company. At that time, the payday runs into the
hundreds of millions of dollars.

The subset of the financial ruling class
is the 'junior bankers' of private equity firms who take about
$500,000 a year. At the bottom rung are the 'junior bankers' of
publicly traded investment houses ('Wall Street') who average $350,000
a year. The financial ruling class is made up of these
multi-billionaire elites from the hedge funds, private and public
equity bankers and their associates in big prestigious corporate legal
and accounting firms. They in turn are linked to the judicial and
regulatory authorities, through political appointments and
contributions, and by their central position in the national economy.

Within the financial ruling class,
political leadership does not usually come from the richest hedge fund
speculators, even less among the 'junior bankers.' Political leaders
come from the public and private equity banks, namely Wall Street --
especially Goldman Sachs, Blackstone, the Carlyle Group and others.
They organize and fund both major parties and their electoral
campaigns. They pressure, negotiate and draw up the most comprehensive
and favorable legislation on global strategies (liberalization and
deregulation) and sectoral policies (reductions in taxes, government
pressure on countries like China to 'open' their financial services to
foreign penetration and so on). They pressure the government to
'bailout' bankrupt and failed speculative firms and to balance the
budget by lowering social expenditures instead of raising taxes on
speculative 'windfall' profits.

The Dance of the Billions: Finance
Capital Reaps the Profits from their Power

Speculators of the world had a
spectacular year in 2006 as global equities hit double digit gains in
the US, European and Asian markets. China, Brazil, Russia and India
were centers of speculative profiteering as the China FTSE index rose
94%, Russia's stock market rose 60%, Brazil's Bovespa was up 32.9% and
India's Sensex climbed 46.7%. In large part the stock markets rose
because of cheap credit (to speculate), strong liquidity (huge
financial, petrol and commodity profits and rents) and so-called
'reforms' which gave foreign investors greater access to markets in
China, India and Brazil. The biggest profits in stock market
speculation occurred under putative 'center-left' regimes (Brazil and
India) and 'Communist' China, which have realigned themselves with the
most retrograde and 'leading' sectors of their financial ruling
class.

Russia's booming stock market reflects a
different process involving the re-nationalization of gas and
petroleum sectors, at the expense of the gangster-oligarchs of the
Yeltsin era and the 'give-away' contracts to European/US oil and gas
companies (Shell, Texaco). As a result huge windfall profits have been
re-cycled internally among the new Putin era millionaires who have
been engaged in conspicuous consumption, speculation and investment in
joint ventures with foreign manufacturers in transport and energy
related industries.

The shift toward foreign-controlled
speculative capital emerging in China, India and Brazil as opposed to
'national and state' funded investment in Russia accounts for the
irrational and vitriolic hostility exhibited by the western financial
press to President Putin.

One of the major sources of
profit-making is in the area of 'mergers and acquisitions' (M&A) --
the buying and selling of multinational conglomerates, with $3,900
billion in deals for 2006. Investment banks took $18.8 billion dollars
in 'fees' leading to multi-million dollar bonuses for 'M&A' bankers.
M&A, hostile or benign, are largely speculative activity fueled by
cheap debt and leading to the greater concentration of ownership and
profits. Today it is said 2% of the households own 80% of the world's
assets. Within this small elite, a fraction embedded in financial
capital owns and controls the bulk of the world's assets and organizes
and facilitates further concentration of conglomerates. The value of
speculative M&A on a world scale is 16% higher than at the height of
the 'DOTCOM' speculative boom in 2000. In the US alone, over $400
billion dollars worth of private equity deals were struck in 2005,
three times higher than the previous year.

To understand who are the leading
members of the financial ruling class one needs only to look at the
ten leading private equity banks and the value and number of M&A deals
in which they were engaged:

Private equity rankings by M&A deals
(Year to Dec 20 2006)

US Value $bn
Number

Blackstone
85.3 12

Texas
Pacific
81.9 11

Bain Capital
Partners 74.7
9

Thomas H Lee
Partners 53.4
6

Goldman
Sachs
51.2 5

Carlyle
50.0 14

Apollo
Management l
44.9 7

Kohlberg Kravis
Roberts 44.5
3

Merrill
Lynch 35.9
3

Cerberus Capital Management
28.6 4

Industry
Total
402.6 1,157

(Financial Times, 12/27/2006, p
13 -- FT montage: Bob Haslett)

The crucial fact is that these private
equity banks are involved in every sector of the economy, in every
region of the world economy and increasingly speculate in the
conglomerates which are acquired.

In the era of the ascendancy of
speculative finance capital, it is not surprising that the three
leading investment banks, Goldman Sachs, Lehman Brothers and Bear
Stearns reported record annual profits, based on their expansion in
Europe and Asia, and their transfer of profits from manufacturing and
services to the financial sector. For the year 2006, Goldman Sachs
(GS) recorded the most profitable year ever for a Wall Street
investment bank, on the basis of big (speculative) 'trading gains and
lucrative investment in the world's worst sweatshops in Asia. GS
reported a 69% jump in annual earnings to $9.54 billion
dollars. Lehman Brothers (LB) and Bear Stearns (BS) equity banks also
recorded record earnings. LB earned a record $4billion for the year.
SB earned a record $2.1 billion dollars. For the year Lehman set aside
about $334,000 dollars per junior banker, while top speculators and
bankers earned a big multiple of that amount.

The dominance of finance capital has
been nurtured by the speculative activity of the controllers and
directors of state-owned companies. State ownership is an
ambiguous term since it raises a further more precise question:
'Who owns the state'? In the Middle East, there are seven
state-owned oil and gas companies. In six of those companies, the
principal beneficiaries are a small ruling elite. They recycle their
revenues and profits through US and EU investment banks largely into
bonds, real estate and other speculative financial instruments (FT
Dec 15, 2006 p.11). State ownership and speculative capital, in the
context of closed 'Gulf-State' type of ruling classes, are
complementary, not contradictory, activities. The ruling regime in
Dubai converts oil rents into building a regional financial
center. Many Jewish-American-led Wall Street investment banks
cohabitate with new Islamic-based investment houses, both reaping
speculative returns.

Much of the investment funds now in the
hands of US investment banks, hedge funds and other sectors of the
financial ruling class originated in profits extracted from workers in
the manufacturing and service sector. Two inter-related processes led
to the growth and dominance of finance capital: the transfer of
capital and profits from the 'productive' to the financial and
speculative sector and the transfer of finance capital overseas, in
the form of take-over of foreign assets now equivalent of around 80%
of the US GDP. The roots of finance capital are embedded in three
types of intensified exploitation: 1) of labor (via extended hours,
transfer of pension and health costs from capital to labor, frozen
minimum wage, stagnant and declining real wages and salaries); 2) of
manufacturing profits (through higher rents, inter-sectoral transfers
to financial instruments, interest payments and fees and commissions
for mergers and acquisitions); and 3) via state fiscal policies by
lowering capital gains taxes, increasing tax write-offs and tax
incentives for overseas investments and imposing regressive local,
state and federal taxes.

The result is increasing inequality
between, on the one hand, senior and junior bankers, public, private
equity, investment and hedge fund directors, and their entourage of
lawyers, accountants and, on the other hand, wage and salaried
workers. Income ratios range between 400 to 1 and 1,000 to 1, between
the ruling class and median wage and salary workers is the norm.

Crisis of the Working and Middle
Class: (Begin to Worry the Ruling Class)

Living standards for the working and
middle class and the urban poor have declined substantially over the
past thirty years (1978-2006) to a point where one can point to a
burgeoning crises. While real hourly wages in constant 2005 dollars
have stagnated, health, pension, energy and educational costs
(increasingly borne by wage and salary workers) have skyrocketed. If
extensions in work time and intensification of work place production
(increases in productivity) are included in the equation, it is clear
that living (including working) conditions have declined sharply.
Even the financial press can write articles entitled: "Why Ordinary
Americans have Missed Out on the Benefits of Growth" (FT November
2, 2006 p.11).

Financial and investment banks are in
charge of advising and directing the 'restructuring' of enterprises
for mergers and acquisitions by downsizing, outsourcing, give-backs
and other cost-cutting measures. This has led to downward mobility for
the wage and salaried workers who retain their jobs even as their
tenure is more precarious. In other words, the greater the salaries,
bonuses, profits and rents for the financial ruling class engaged in
'restructuring' for M&As, the greater the decline in living standards
for the working and middle class.

One measure of the enormous influence of
the financial ruling class in heightening the exploitation of labor is
found in the enormous disparity between productivity and
wages. Between 2000 and 2005, the US economy grew 12%, and
productivity (measured by output per hour worked in the business
sector) rose 17% while hourly wages rose only 3%. Real family income
fell during the same period (FT November 2, 2006
p.11). According to a poll in the fall of November 2006, three
quarters of Americans say they are either worse off or no better off
than they were six years ago (FT November 3, 2006 p.13).

The impact of the policies of the
financial ruling class on both the manufacturing and service sectors
transcends their profit skimming, credit leverage on business
operations and management practices. It embraces the entire
architecture of the income, investment and class structure. The growth
of vast inequalities between the yearly payments of the financial
ruling class and the medium salary of workers has reached
unprecedented levels. The financial elite receives something in the
range of a ratio of 500 up to 1,000 times that of an average worker,
depending on how narrowly or broadly we conceive of the financial
ruling class.

Members of the financial ruling class
have noted these vast and growing inequalities and express some
concern over their possible social and political
repercussions. According to the Financial Times (December 21,
2006), billionaire Stephen Schwartzman, CEO of the private equity
group Blackstone warned "that the widening gap between Wall Street's
lavish pay packages and middle America's stagnating wages risks
causing a political and social backlash against the US's 'New
Rich'." Treasury Secretary and former CEO of Goldman Sachs, Hank
Paulson admitted that median wage stagnation was a problem and that
amidst "strong economic expansion many Americans simply are not
feeling [sic!] the benefits" (FT November 2, 2006 p. 11).

Ben Bernanke, Chairman of the Federal
Reserve Bank testified before the Senate that "inequality is
potentially a concern for the US economy . . . to the extent that
incomes and wealth are spreading apart. I think that is not a good
trend" (Ibid). In 2005, the proportion of national income to GDP
going to profits, rents and other non-wage and salary sources is at
record levels: 43%. Inequality in the distribution of national income
in the US is the worst in the entire developed capitalist
world. Moreover studies of time series data reveal that in the US
inequality increased far greater and intergenerational social mobility
was far more difficult in the US than any country in Western
Europe. The growth of monstrous and rigid class inequalities reflects
the narrow social base of an economy dominated by finance capital, its
ingrown intergenerational linkages and the exorbitant entry fees
($50,000 per annum tuition with room and board) to elite private
universities and post-graduate business schools. Equally important,
the political power of finance capital and its 'associated'
conglomerates wield uncontested political power in the US in
comparison to any country in Europe. As a result the US government
redistributes far less through the tax and social security, health and
educational system than other countries. (ibid)

While some financial rulers express some
anxiety about a 'backlash' from the deepening class divide, not a
single one publicly supports any tax or other redistributive
measures. Instead they call for increases in educational up-grading,
job retraining and greater geographical mobility, though it is
precisely among the educated middle class which is suffering salary
stagnation.

Neither the Democratic Party majority in
Congress, nor the Republican-controlled Executive offer any proposals
to challenge the financial ruling class's dominance nor are there any
proposals to reverse its most retrograde policies causing the growing
inequalities, wage stagnation and the increasing rigidity of the class
structure. The reason has been reported in the Wall Street Journal
and the Financial Times: An overwhelming chunk of the funds
that Democrats raise nationally for election campaigns comes either
from Wall Street financiers or Silicon Valley software entrepreneurs.
(FT November 3, 2006 p. 13). The Democratic congressional
electoral campaign was tightly controlled by two of Wall Street's
favorite Democrats, Senator Charles 'Israel First' Schumer and
Congressman Rahm Immanuel, who selectively funded candidates who were
pro-war, pro-Wall Street and unconditionally pro-Israel. Democrats
slated to head strategic Congressional committees like Zion-Lib Barney
Frank have already announced they have 'good working relations' with
Wall Street.

The
Financial Ruling Class Also Governs

Ruling classes rule the economy, are at
the top of the social structure and establish the parameters and rules
within which the politicians operate. More often than not few actually
engage directly in congressional politics, preferring to build
economic empires while channeling money toward candidates prepared to
do their bidding. Only when an apparent division occurs, especially
within the Executive, between the interests of the ruling class and
the policies of the regime will elite members of the ruling class
intervene directly or take a senior executive position to 'rectify'
policy.

Ruling Class Political Power: Paulson Takes Over Treasury

Several sharp divergences occurred
during the Bush regime between finance capital and policymakers. These
policies prejudiced or threatened to seriously damage important
sectors of the financial ruling class. Theses include: 1) the
aggressive militarist and protectionist policies pursued by senior
Pentagon officials and 'Zion-con' Senators toward China; 2) the
political veto by Congress of the sale of US port management to a Gulf
State-owned company and of a US oil company to China; 3) the failure
of the Bush regime to secure the privatization of social security and
to weaken the regulatory measures introduced in the aftermath of the
massive corporate (Enron and World Com) and Wall Street swindles, and
4) the need to put a check on the uncontrolled growth of fiscal
deficits resulting from the Middle East wars, the ballooning trade
deficits and the weakening dollar.

The headlines of the financial press (FT
December 4, 2006 p.3) spell out finance capital's direct intervention
into key White House policy making:

"Goldman Sachs Top Alumni Wield Clout in
White House" and "Former Bank Executives Hold Unprecedented Power
within a US Administration."

US financial and manufacturing ruling
classes have long influenced, advised and formulated policy for US
Presidents. But given the stakes, the risks and the opportunities
facing the financial ruling class, it has moved directly into key
government posts. What is especially unprecedented is the dominant
presence of members from one investment bank -- Goldman Sachs. In late
November 2006, Goldman Sachs (GS) senior executive William Dudley took
over the Federal Reserve Bank of New York markets group. Hank Paulson,
ex-CEO of GS is Treasury Secretary -- explicitly anointed by President
Bush as undisputed czar of all economic policies. Reuben Jeffrey, a
former GS managing partner is the chief regulator of commodity futures
and options trading, Joshua Bolten, White House Chief of Staff (he
decides who Bush sees, when and for how long -- in other words
arranges Bush's agenda) served as GS executive director. Robert Steel,
former GS vice chairman, advises Paulson on domestic finance. Randall
Fort, ex-GS director of global security, advises Secretary of State
Rice. The ex-GS officials also dominate Bush's working group on
financial markets and financial crisis management. The investment
bankers wielding state power will control the Bush regime's biggest
housing giants (Fannie Mae and Freddie Mac), tax policy, energy
markets -- all issues that directly affect the investment banks. In
other words, the financial banks will be 'regulated' by their own
executives. The degree of finance capital's stranglehold on political
power is evidenced by the total lack of criticism by either party. As
one financial newspaper noted: "Neither Mr. Bush nor Goldman have been
criticized by Democrats for holding too many powerful jobs in part
because the investment bank (GS) also has deep ties to
Democrats. Goldman represented the biggest single donor base to the
Democrats ahead of this (2006) year's mid-term election."(FT
December 4, 2006)

Among Paulson's first moves was to
organize a top level delegation to China and a working group to work
on forming a 'strategic partnership'. Its task is to accelerate the
'opening' of China's financial markets to penetration and majority
takeovers by US operated investment funds. This represents a potential
multi-trillion dollar window of opportunity. By seizing the initiative
Paulson hopes to undercut the anti-China cohort of neo-con, Pentagon
and White House militarists, as well as backwater backers of Taiwanese
independence and Congressional chauvinist demagogues like Senator
Schumer who threaten to undermine lucrative US-Chinese economic
relations.

To lower the fiscal deficit, Paulson
proposes to 'reform' entitlements -- reduce spending on Medicare and
Medicaid and to work out a deal with the Democrats to privatize Social
Security piecemeal.

Where finance capital has not been able
to fashion a coherent economic strategy is with regard to Washington's
Middle East wars. Because of the pull of the Zionist Lobby on many of
leading lights of Wall Street -- including its unofficial mouthpieces
-- the Wall Street Journal and the NY Times -- Paulson
has failed to formulate a strategy. He does not even pay lip service
to the Baker Iraq Study Group report's proposal to gradually draw down
troops for fear of alienating some key senior executives of Goldman
Sachs, Stern, Lehman Brothers et al who follow the 'Israel First'
line. As a result, Paulson has to work around the Lobby by focusing on
dealing with the Gulf city-state monarchies and Saudi Arabia in order
to avoid another disastrous repetition of the Dubai Port management
sale. Paulson above all wants to avoid Zionist political interference
with the two way flow of finance capital between the
petrol-financial-banking complexes in the Gulf States and Wall Street.
He wants to facilitate US finance capital's access to the large dollar
surpluses in the region. It is not surprising that the Israeli regime
has accommodated their wealthy and influential financial backers on
Wall Street by drawing a distinction between 'moderate' (Gulf States)
with whom they claim common interests and 'Islamic extremists.'
Israeli Prime Minister Olmert has directed his zealots in the
US-Jewish Lobby to take heed of the refinements in the Party Line in
dealing with US-Arab relations.

Nevertheless with all its concentrated
political power and its enormous wealth and economic leverage over the
economy, Wall Street cannot control or avoid serious economic
vulnerabilities or possible catastrophic military-political events.

The
Future of the Financial Ruling Class

What is abundantly clear is that one of
the main threats to world markets -- and the health of the financial
ruling class -- is an Israeli military attack on Iran. This will
extend warfare throughout Asia and the Islamic world, drive energy
prices beyond levels heretofore known, cause a major recession and
likely a crash in financial markets. But as in the case of the
relationships between Israel and the US, the Zionist Lobby calls the
shots and its Wall Street acolytes acquiesce. As matters now stand,
the Jewish Lobby supports the escalation of the Iraq war and the
savaging of Palestine, Somalia and Afghanistan. It has neutralized the
biggest and most concerted effort by big name centrist political
figures to alter White House policy. Baker, Carter, former military
commanders of US forces in Iraq have been savaged by the Zionist
ideologues. Under their influence the White House is putting into
practice the war strategy presented by the 'American' Enterprise
Institute (a Zioncon think tank). As a result parallel to Bush's
appointment of Paulson and Wall Streeters to run imperial economic
policy, he has appointed an entire new pro-war civilian
military-security apparatus to escalate and extend the Middle East
wars to Africa (Somalia) and Latin America (Venezuela).

Sooner or later a break between Wall
Street and the militarists will occur. The additional costs of an
escalating wars, the continual ballooning debt payments, huge
imbalances in the balance of payments and decreasing inflows of
capital as multi-national repatriate profits and overseas central
banks diversify their currency reserves will force the issue. The
enormous and growing inequalities, the massive concentration of wealth
and capital at a time of declining living standards and stagnant
income for the vast majority, gives the financial ruling class little
political capital or credibility if and when an economic and financial
crisis breaks.

With foreign investors owning 47% of all
marketable US Treasury bonds in 2006 compared to 33% in 2001 and
foreign holdings of US corporate debt up to 30% today, from 23% just
five years ago, a rapid sell-off would totally destabilize US
financial markets and the economic system as well as the world
economy. A rapid sell-off of dollars with catastrophic consequences
cannot be ruled out if US-Zionist militarism continues to run amuck,
creating conditions of extended and prolonged warfare.

The paradox is that some of the most
wealthy and powerful beneficiaries of the ascendancy of finance
capital are precisely the same class of people who are financing their
own self-destruction. While cheap finance fueling multi-billion dollar
mergers, acquisitions, commissions and executive payoffs, heightened
militarism operates on a budget plagued by tax reductions, exemptions
and evasions for the financial ruling class and ever greater squeezing
of the overburdened wage and salary classes. Something has to break
the cohabitation between ruling class financiers and political
militarists. They are running in opposite directions. One is investing
capital abroad and the other spending borrowed funds at home. For the
moment there are no signs of any serious clashes at the top, and in
the middle and working classes there are no signs of any political
break with the two Wall Street parties or any challenge to the
militarist-Zionist stranglehold on Congress. Likely it will take a
catastrophe, like a White House-backed Israeli nuclear attack on Iran
to detonate the kind of crisis which will provoke a deep and
widespread popular backlash of all things military, financial and made
in Israel.